matador1 wrote:Years from now, college students will study the events that have occured in our industry over the last 12 months and the period leading up to it. I predict that the real estate industry lanscape and supporting cast will forever be changed.
I truely believe that this could be the thing that forces us in the "now" and "live on credit" society to change our ways.
Funny thing, I have done several loans for people on this board and it seems like the people that hunt and fish, appreciate the simple things in life have had the best credit and taken better care of themselves financially. Interesting!
Hope you won't mind an old fella telling you why I disagree with your premise and giving you my views on the subject.
In 2003 my wife and I were living in Las Vegas. We'd been there 12 years and had started and owned a small mortgage company that was a broker for conforming, non-conforming and private investor funded loans.
For 15 years prior to that we lived in Hawaii and watched the economy there go through several severe swings up and down. I saw the same early indicators forming in Las Vegas.
Essentially, the first warning sign is when real estate prices escalate at a much faster rate than the CPI, for more than a year or two.
The 2nd warning should be when there is a significant increase in non-owner occupied (speculators sometimes) buyers of properties.
The 3rd is when a property sells 2 times in a 12-18 month period, and that happens twice, each time for healthy profits.
The 4th is when there are too many builders, realtors, lenders and loan agents in a given area for the size maket they serve and they begin looking to "cut corners" on documentation, verifications and other loan processing procedures in order to get the deal done.
All four of those and more existed in Vegas in 2003. Several had been taking place for a year or longer. Real estate prices were going up at a 20% compound rate. It was a speculators paradise ... for awhile. I saw and recognized those signs. My wife and I agreed that the bottom would fall out of the real estate market, mortgage business, the construction industry and anything related to those three.
We took our time and put our home and business on the market in late 2003. We searched for and found land in a small rural community in N TX where an acre of ground could still be bought for under $2K verses the $150K/acre for raw land without water or utilities in the NV desert. We bought 132 acres of land for under $250K. We designed and built our 3,500 sf brick "retirement" home for less than $40/sf. all of that for less than the cost of a 1/2 acre lot in our area of Vegas ($475K).
When I told close friends and our private investors that the "Vegas sky is falling" they thought I had taken leave of my former good senses. I warned them that IMO by late 2005 a crash would start that would be the worst Vegas had ever seen in its history. We sold our home in late 2004 for $500K more than it cost to build it in 1991. And ... the vast majority of that appreciation took place in 2002-2004. We closed escrow on the sale of our business on 12-31-04.
Turned out that I was wrong. By almost a year. The crash didn't begin in ernest in 2005. It was 2006. Las Vegas now leads the nation in foreclosures with almost 1 out of every 40 homes now in the process. Another 5 of 40 are in either lender owned or in serious default and the underlying loans will have to be declared non-performing by the holders before year end. The mortgage broker we sold our business to in 2004 has since closed it's doors (only took 2 years) after our operating it successfully for 14 years.
Now ... back to my original disagreement with your original post. I doubt that "college students will study the events that have occured in our industry over the last 12 months and the period leading up to it. I predict that the real estate industry lanscape and supporting cast will forever be changed." You see, those in the real estate and lending industries are glutons for punishment and in my experience incapable of or unwilling to learn from the past. Therefore, they have always been doomed to repeat it. Perhaps in another market, but certainly they'll do it again and again because GREED is the motivating factor.
Now, for us, don't feel too badly. We just have to spend our days with our two yellar dawgs training, hunting ducks and otherwise missing the full time mortgage business.
